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Haig Farris bets on a technology with ‘mind boggling’ benefits

January 12, 2015

From the Penn Law Journal Fall 2014 issue.

Nearly 70 years ago, Penn’s School of Engineering worked in secrecy to develop a new technology with the capability to solve complex mathematical problems at speeds never seen before. Engineers employed that speed and calculating power to test a proposed design for the hydrogen bomb. The world’s first electronic computer, known as the ENIAC, was hailed as a revolutionary machine that would advance research and save money.

Several generations later, there is once again a Penn connection to a major breakthrough in computing. Only this time the action originates in Vancouver, Canada, where Penn Law alumnus Haig Farris L’63 was the founding investor in a company named D-Wave, which has developed market-ready proprietary technology to build quantum computers.

Farris, president of Fractal Capital, and his fellow investors have a multimillion dollar stake in D-Wave, so he is heavily invested in its success. As one of the most influential venture capitalists in western Canada, Farris has listened to tons of pitches and reviewed sheaves of R&D proposals. But he’s never been more excited than he is about the commercial potential and societal benefits of quantum computing.

It doesn’t take him long to get cranked up about the technology. Farris says quantum computers are thousands of times faster than conventional computers, and are capable of providing solutions to complex problems in a matter of seconds, rather than years — all of which will lead to quantum leaps in many spheres of life.

Farris took something of a quantum leap in his own career. Out of law school he followed the path of his grandfather, Wallace Farris, who studied at Penn Law in the early 1900s, when it was located at Independence Hall. His grandfather went on to start what remains one of Vancouver’s most respected law firms, which the younger Farris joined upon graduation.

For five years, Farris dutifully practiced what he calls the art of “suing and defending.” All that changed when he represented oil and gas promoters and geologists at trial. A science novice, he had to bone up on geology in order to cross-examine a witness. He recalls how the subject fascinated him, made “the rocks come alive.” In due time, he left the practice of law to co-found a financial consulting firm and then, in what amounted to a start-up of his own, the first venture capital firm in British Columbia. Since then, he’s invested in more than 100 start-ups and early stage companies, including some hits and misses.

One of his fabled misses occurred early on. Back in the 1970s, Farris thought he had hit a vein of gold when he collaborated with an eccentric but ingenious Ukrainian immigrant who had invented a rear projection screen with application for the emerging large screen home television industry and instant replay in sports.

Farris arranged for a demonstration of the technology during a football game in his hometown of Vancouver. On that day fans saw the world’s first instant replay flashed onto a 16 foot by 20 foot screen. Intrigued, consumer giant Hitachi asked Farris to scale up and mass produce the screens for use in the company’s prospective home television system.

During the production run, an employee dropped a screw into the roller that produced the screens, causing visible flaws in the middle of them. Farris turned to the original custom toolmaker for help, but he died before he could make repairs.

In the meantime, soaring interest rates cooled Hitachi’s ardor and the company changed plans. “They canceled the million dollar order,” laments Farris, who had invested up to a half million dollars in the project. “Poof, ten years of effort, patents and development up the (chimney) flue in a week. 3M bought the patents from the receiver and we investors drowned our sorrows in cheap wine.”

False starts and missed opportunities have haunted investors ever since King Ferdinand and Queen Isabella backed Columbus. Investors spend their lives searching for black swans — rare and unexpected breakthroughs, in the lingo of the business. Unfortunately, more often than not they find themselves on the business end of ugly ducklings, with only one in ten investments turning a profit, according to Farris. But with any luck, Farris and his fellow investors will be drinking champagne from a chalice if D-Wave turns out the way he envisions. And there are signs that it could.

D-Wave developed rather organically. For nine years, in the 1990s, Farris taught a class in entrepreneurship at the University of British Columbia (UBC), his alma mater. The class catered to engineering, science and MBA students. Every semester Farris would assemble the students in teams and ask them to write a business plan for a new technology.

He took a shine to the scientists, in particular the physicists, whom Farris calls “superstars.” He’s long admired their ability to analyze reams of complex data and solve problems, which he considers the heart of business development. One of his superstars was Geordie Rose, an engineer and former member of the Canadian Olympic wrestling team studying for a PhD in theoretical physics. Rose had ambitions but no experience in business, so he enrolled in Farris’ class in 1994.

Rose says he took the class on a whim. He approached it with skepticism, secure in the knowledge that business was for people who lacked the higher order thinking of physicists. He soon discovered that business was more complicated than he had imagined.

Farris remembers how Rose got up one day in class and made a crystal clear presentation on the principles behind physics. It made an impression on his classmates and on Farris. Several years later, Rose visited Farris’ office to tell him about his work on a quantum transistor. Farris wrote him a $4,000 check on the spot so he could buy a laptop computer and printer to write a business proposal.

That was the start of D-Wave, in 1999. Fifteen years later, Rose sits on the brink of something big — after seasons of striving and strife.

“D-Wave wouldn’t exist without Haig,” Rose says. “Of all the people I’ve met in my life, I’ve never met anybody with such unflagging optimism and good cheer, and it’s contagious.”

Rose recalls accompanying Haig on fund-raising calls in the early days. One angel investor looked at his watch the whole time and kicked them out of his office when he learned there were no plans for an IPO in the next 18 months. Rose was shaken, but not Farris, who plodded on. After 50 rejections, financing started to flow.

“When things get tough, some people fold or go negative, and that’s never been the case with him,” says Rose. “He’s kind of the oak tree that you can lean on.”

Perseverance pays. In the last few years, D-Wave has really begun to take off. The company has been featured in Scientific American and on the cover of Time; the MIT Technology Review named D-Wave to its list of the 50 Smartest Companies, an echelon that includes Amazon, Google, IBM and Microsoft; and big-name companies and institutions have started to vote with their purchases of quantum computers, which are the size of a big cabinet and cost between 12 and 15 million dollars apiece.

Buyers include partners Google and NASA, and Lockheed Martin and the University of Southern California, which is bidding to become an incubator of this new technology.

Lockheed employs the computers to verify the software used in F-35 Navy fighter planes. As Farris explains, the software enables pilots to turn and fire missiles with accuracy. At $20 million per plane, Lockheed needs to reduce this cost. He says quantum computers, with their speed advantage over classical computers, are poised to do just that.

Farris says Google has used the D-Wave computer to test and implement Google Glass, hi-tech eyewear which, for example, helps physicians retrieve medical records and moviegoers launch movie reviews from posters. It may even one day soon allow people to track the location of friends and family.

NASA is developing algorithms to assist the Kepler space telescope in its search for life on other planets.

At the moment, the future appears bright for quantum computing. Farris says he is working on deals with two major universities in the United States and one in the United Kingdom, none of which he is free to disclose yet; and technology, oil and gas and chemical companies are beginning to pay attention. There could also be a future collaboration between D-Wave and Zymeworks, a biotechnology company headed by another former student who is working at the frontier of personalized medicine developing drugs to correct genetic errors and target cancer and autoimmune diseases. Merck and Eli Lilly have invested millions in the Zymeworks’ platform.

Farris thinks the break-out moment will come in a few years, adding, in an uncharacteristic note of caution, that progress could be delayed by a lack of mathematicians, physicists and computer scientists with the skills to program and use quantum computers.

All the same, he quickly pivots to a sunnier outlook. “You don’t have to be a rocket scientist or do a market study to know that if somebody produces a computer that’s a billion times faster than the fastest computer today, that it would be a valuable thing to do.”